"In a more challenging environment marked by slower economic
growth, higher inflation and (the) weaker rupiah, BCA has been
able to deliver a solid performance with a solid liquidity
position and strong capital," BCA chief Jahja Setiaatmadja said
on Wednesday.

"We are confident that amidst recent challenges in the
economy, prospects for the banking industry in Indonesia remain
promising."

Setiaatmadja added that non-performing loans were only
slightly higher at 0.5 percent against 0.4 percent last year,
while corporate lending was up 25.5 percent year-on-year.

The central bank's benchmark interest rate has gone up 150
basis points since June to a 4-1/2 year high of 7.25 percent.
Economic growth is expected to come in well under 6 percent this
year, compared with earlier forecasts of 6.2 percent or more,
while the rupiah has fallen about 14 percent this year.

Setiaatmadja said overheads had risen, cutting into profit
margins. "The central bank is already indicating that it expects
loan growth to slow down, at rate of 14 to 15 percent.

"One concern is if the banks are still pushing loan growth
at above 20 pct, it will trigger a rate war between banks and
will put pressure on our income margins."

CREDIT SLOWDOWN

Bank Mandiri Chief Executive Budi G. Sadikin also expected a
credit growth slowdown next year to between 15 and 20 percent.

Some analysts said declining net interest margins were
expected to continue, which coupled with a slowdown in mortgage
growth would force banks to cut costs.

"As banks have been adjusting their rates on both assets and
liabilities, we expect net interest margins to decline to 6.8
percent by the end of this year from 7.0 percent in the second
quarter," Jakarta-based Mandiri Sekuritas said in a note, added
it revised down earnings projections for 2013-14 by 9 and 10
percent.

"We anticipate total loan disbursements will start slowing
down in October as the rupiah is stabilising, banks are
adjusting their lending rates and the new rulings on mortgage
loan-to-value (LTV) and secondary reserve requirement are being
implemented."

In August, Indonesia's central bank cut the ceiling on the
loan-to-deposit ratios (LDR) of commercial banks to 92 percent
and said it planned to increase the secondary minimum reserve
requirement for rupiah deposits to 4 percent.

However, the mortgage slowdown is seen as helping reduce
risk in the booming property sector.

"Although this new mortgage regulation may dampen future
housing demand, we think it would not only help to prevent but
also curb potentially higher loan defaults as have started being
seen in some banks' mortgage performance," said Teguh Hartanto,
a banking analyst at Bahana Securities.

Next In Financials

NEW YORK, Dec 9 A private U.S. regulator
launched a hotline on Friday to hear from ex-Wells Fargo & Co
employees who were fired for allegedly opening
unauthorized accounts after news reports that the bank may have
retaliated by terminating whistleblowers in the scandal.

Dec 9 A former Cantor Fitzgerald trader has been
indicted on charges that he defrauded investors by lying about
the price of mortgage bond transactions he handled for them
after the financial crisis, U.S. prosecutors said on Friday.

Reuters is the news and media division of Thomson Reuters. Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms. Learn more about Thomson Reuters products: